mmicc 2010 - 3rd place - pen
TRANSCRIPT
CIRQUE DU SOLEIL
THE WHARTON SCHOOL | TEAM 2
RAYMOND FLORES | CASEY KLYSZEIKO CAMERON ROUZER | MINDY ZHANG
EXTENDING THE EXPERIENCE: PROGRAMS, PARTNERS, & PLACES
Problem Definition
PROBLEM STATEMENTWhich opportunities should Cirque du Soleil pursue in order to grow sustainably and continuously push the creative frontier?
WHAT OPPORTUNITIES?
PROGRAMS PARTNERS PLACES
• How to balance touring and resident programs?
• New experiences and revenue streams?
• Who will provide the right synergies?
• What is the optimal deal structure?
• Which geographic markets?
Context Implementation & Results ConclusionPrograms Partners Places
Since its founding, Cirque du Soleil has successfully differentiated itself in the entertainment industry
Redefined Experience
Unique Positioning
Win-Win Partnerships
Customer Loyalty
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil has redefined the traditional circus experience
TRADITIONAL CIRCUS CIRQUE DU SOLEIL
Circus performers and animals
Street performers, no animals
Low-brow amusement Provocative, sophisticated performances
Incorporates elements of “typical” circus experience
Emphasis on innovation and creativity
Targets kids and families Targets sophisticated adult population
Redefined Experience
Unique Positioning
Win-Win Partnerships
Customer Loyalty
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil has redefined the traditional circus experience
TRADITIONAL CIRCUS CIRQUE DU SOLEIL
Circus performers and animals
Street performers, no animals
Low-brow amusement Provocative, sophisticated performances
Incorporates elements of “typical” circus experience
Emphasis on innovation and creativity
Targets kids and families Targets sophisticated adult population
Redefined Experience
Unique Positioning
Win-Win Partnerships
Cirque du Soleil Mission Statement“To invoke, provoke, and evoke the imagination, the senses, and the emotions of people around the world”
Customer Loyalty
Context Implementation & Results ConclusionPrograms Partners Places
It’s uniquely positioned away from competing forms of performing arts entertainment
Redefined Experience
Unique Positioning
Win-Win PartnershipsHigh priceLow price
Intense
Mild
PERFORMING ARTS MARKET
Customer Loyalty
Context Implementation & Results ConclusionPrograms Partners Places
It has been able to realize success through its “win-win” partnerships
Cirque du Soleil’s brand brings consumers to partner venue1. Contributed to doubled earnings growth
of three largest casino partners2. NY-NY experienced 23% increase in net
revenues given the addition of Zumanity3. MGM increased 13% increase in slot
revenue attributed to Kà
Redefined Experience
Unique Positioning
Win-Win Partnerships
Customer Loyalty
Context Implementation & Results ConclusionPrograms Partners Places
The typical Cirque du Soleil customer is affluent and loyal to the brand
Redefined Experience
Unique Positioning
Win-Win Partnerships
Customer Loyalty
• 70% repeat customer base• Targets sophisticated and educated adults• $75,000+ in average annual income
Context Implementation & Results ConclusionPrograms Partners Places
Due to its differentiated strategy, Cirque du Soleil has realized tremendous financial success
Redefined Experience
Unique Positioning
Win-Win Partnerships1992
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20070
100
200
300
400
500
600
700
800
Revenue (CAD$ millions)
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
02468
1012
Annual Tickets Sold (millions)
Customer Loyalty
70 million tickets sold by 2007
Context Implementation & Results ConclusionPrograms Partners Places
However, the industry is becoming increasingly competitive
Fragmented Industry• 60 circuses in U.S.
alone
Past directors are creating their own
shows
Emergence of niche circuses
How will Cirque du Soleil maintain its distinctive advantage?
Context Implementation & Results ConclusionPrograms Partners Places
Resident model drives more profits, better efficiency, and lower
capital risk
And Cirque du Soleil’s business model is changing to a mixture of touring and resident shows
Touring Resident
Number of Cities 100 1
Price $40-$90 $100-$150
Seating Capacity 2,500 1,750
Occupancy to Break-Even 65% 60%
Average Occupancy Variable 95%
Performances/Year 350 480
Partners Limited Sponsors Casinos in Las Vegas; Disney
Cirque’s Capital Investment $50 Million $15 Million
Note: Figures are approximate and from case
Touring model allows for greater exposure, more touch points with
consumers, and better diversification
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil is presented with many new opportunities
• On a weekly basis, Cirque du Soleil is offered opportunities with new show partners across the globe
• Corporations have a growing interest in associating with Cirque du Soleil
Cirque du Soleil is a growing global brand that people want to be a part of and associate with
Context Implementation & Results ConclusionPrograms Partners Places
There are many regions for continued global growth
• High brand awareness– Shows regularly sell-out
• Only 3 countries with resident programs– 7/10 U.S. shows in Las Vegas
Note: Planned 2010 Opening In Dubai
Touring Coverage
Resident Locations
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil is at a crossroads with new opportunities and threats
• Scalable creativity• The Cirque du Soleil experience• Loyal customers• Profitability• Investment capability
• Many partnership opportunities• Untapped market potential• More global audience• Leverage brand in new platforms
• Increasingly complex business model
• Dependence on specific people• Lack of diversification
• Uncontrolled expansion leading to brand dilution
• Competitive entrants• Partners’ demands on creative
control
Strengths
Opportunities Threats
Weaknesses
Context Implementation & Results ConclusionPrograms Partners Places
Problem Statement
Which opportunities should Cirque du Soleil pursue in order to grow sustainably and continuously push the creative frontier?
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil has leveraged its current model for engaging consumers extremely well
CURRENT MODELCustomer interacts with Cirque du Soleil mainly through its tour and
resident shows.
Context Implementation & Results ConclusionPrograms Partners Places
However, Cirque du Soleil can extend its distinctive experience through new platforms
NEW MODELCustomer interacts with Cirque du
Soleil through new programs, partners and places.
CURRENT MODELCustomer interacts with Cirque du Soleil mainly through its tour and
resident shows.
PROGRAMS
PARTNERS
PLACES
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
4. Invest in social media
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
Context Implementation & Results ConclusionPrograms Partners Places
Existing and new programs will extend and improve the Cirque du Soleil experience
OBJECTIVETo create brand extensions that increase opportunities to engage with the Cirque du Soleil experience
Recommendations1. Continue pursuing both touring and resident shows
simultaneously2. Launch a nightclub and flagship theatre3. Leverage social media to further engage consumer
Context Implementation & Results ConclusionPrograms Partners Places
Existing tours and resident shows serve as complements and should be pursued together
TOURING SHOWS
RESIDENT SHOWS
• BROAD ACCESS• Lower-priced tickets• Serve non-resident show cities
• EXCLUSIVE EXPERIENCE• Higher-priced tickets• Serve selective cities with
large tourism industries
IMPLICATIONCirque du Soleil should pursue both programs simultaneously to extend customer
lifetime value and increase financial and brand impact
Touring shows encourage customers to seek out
resident shows in the future
Context Implementation & Results ConclusionPrograms Partners Places
A nightclub and flagship theatre will further extend the Cirque du Soleil experience
NIGHTCLUB AND
FLAGSHIP THEATRE
1. LAUNCH NIGHTCLUB WITH EXISTING
PARTNER
OBJECTIVESCreative Potential
Compatibility with Brand Experience Feasibility of Implementation
Financial Opportunity
Evaluate opportunities
2. BUILD FLAGSHIP THEATRE
Context Implementation & Results ConclusionPrograms Partners Places
The nightclub will extend the experience in a new realm with limited financial and operational risks
NIGHTCLUB • Unique brand extension• Can leverage existing partners’ expertiseWhy?
Implementation• Work with MGM Mirage – best relationship• Upfront cost: $1.6mil (50% of total capital)
Risk Mitigation• Reduce financial and operational risk through
partnership / short term contract
1. LAUNCH NIGHTCLUB WITH EXISTING PARTNER
Outcomes • Annual revenue: $2.8 million
Context Implementation & Results ConclusionPrograms Partners Places
The flagship theatre will be the premier creative vehicle for Cirque du Soleil
FLAGSHIP THEATRE
• Base for creative freedom• Significant financial potentialWhy?
Implementation • Upfront cost: $180million
Risk Mitigation• Limit financial risk through gradual development
timeline• Launch in new location to limit cannibalization
2. BUILD FLAGSHIP THEATRE
Outcomes • Annual revenue: $100 million
Context Implementation & Results ConclusionPrograms Partners Places
Finally, interactive and social media will engage the consumer and build loyalty
BUILDING BUZZ THROUGH SOCIAL
MEDIA
RECOMMENDATIONSIncrease usage of social & interactive media• Social networking sites (blogs, websites)
OBJECTIVEIncrease exposure to Cirque du Soleil to attract new customers and continue loyalty among existing customers• Of the 80% of online American adults who use social
media monthly, 48% use it to review product and service ratings*
EXPECTED OUTCOMES• Increase connection with potential customers• More ticket purchases from existing customers
* 2009 Forrester Research
Context Implementation & Results ConclusionPrograms Partners Places
New programs will enable the consumer to extend the Cirque du Soleil experience
TOURING SHOWS
BUILDING BUZZ THROUGH SOCIAL MEDIA
RESIDENT SHOWS
NIGHTCLUB AND
FLAGSHIP THEATER
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
4. Invest in social media
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
Context Implementation & Results ConclusionPrograms Partners Places
Finding the right partners will be integral to enhancing and growing the Cirque du Soleil experience
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
1. Respect Creative FreedomCirque du Soleil must have complete control over all artistic decisions
2. Brand CompatibilityThe mission, values, and market perception of a partner must align with that of Cirque du Soleil
3. Mutual Financial AdvantageCirque du Soleil presence provides additional revenue opportunities for partnerAmplifies Cirque’s financial returns and awareness
Context Implementation & Results ConclusionPrograms Partners Places
Cirque should build upon the success of past resident program partnerships
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
Respect Creative Freedom
Brand Compatibility
Mutual Financial
AdvantageCasinos
Hotels
Cities
Restaurants
Venues
Context Implementation & Results ConclusionPrograms Partners Places
Respect Creative Freedom
Brand Compatibility
Mutual Financial
AdvantageCasinos
Hotels
Cities
Restaurants
Venues
Resident partnerships should be pursued with casinos and hotels
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
• Continue resident programs with casinos• Pilot new programs with compatible hotel resorts
Context Implementation & Results ConclusionPrograms Partners Places
The Atlantis Palm is the ideal candidate for a pilot hotel partnership
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
The Cirque Effect• Hotel-owned restaurants and shopping
will benefit from additional spending by Cirque customers
• 80% of customers are not staying at the hotel
• Average attendee spends approx. $30 on food and drinks
At a Glance• Rooms: 1,539• Restaurants: 17• Average Rate:
$490 - $5,450
Recommended Target: Atlantis Palm, Dubai
Deal Structure• Atlantis pays $100M
construction cost• $30M production cost
evenly split• Profits shared 50/50• Cirque maintains complete
creative control
Context Implementation & Results ConclusionPrograms Partners Places
There is an opportunity to benefit from partnerships with touring shows
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
Respect Creative Freedom
Brand Compatibility
Mutual Financial Advantage
Corporate Sponsorships
Context Implementation & Results ConclusionPrograms Partners Places
Respect Creative Freedom
Brand Compatibility
Mutual Financial Advantage
Corporate Sponsorships
Infiniti provides an example of a lucrative corporate sponsor
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
Natural alignment of market perception of performance and innovation
Infiniti financially supports Cirque du Soleil shows while Infiniti benefits from brand association
Cirque du Soleil brand moves from one night experience to everyday exposure
Case Example: Infiniti Automotive Partnership
Context Implementation & Results ConclusionPrograms Partners Places
New hotel partners and corporate sponsors will support, enhance and grow the Cirque experience
Resident Partnerships Touring Partnerships
ex. Atlantis Palm Dubai ex. Infiniti Sponsorship
• Drive additional revenue streams• Facilitate new growth and expansion• Extend the brand experience to new venues
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
4. Invest in social media
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should expand in geographies that share characteristics with current successes
• Cirque du Soleil has worldwide presence• Resident shows extremely concentrated in the U.S., particularly Las Vegas
• Cirque du Soleil should look to expand in geographies that share similar location and population characteristics with current resident shows
Location Criteria
1. High and/or growing population income2. Tourism & travel-based destination3. Past experience from touring shows4. Diversify locations and offerings
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should expand in geographies that share characteristics with current successes
1. High and/or growing
population income
2. Tourism & travel-based destination
3. Past experience from touring
shows
Dubai
London
Sydney
Berlin
4. Diversify locations and
offerings
New York
$41,800
$35,400
$38,500
$34,200
$46,400
6,535,000 arrivals per year
15,340,000arrivals per year
1,869,000 arrivals per year
2,552,000arrivals per year
7,646,000arrivals per year
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Context Implementation & Results ConclusionPrograms Partners Places
Dubai, London, Sydney and Berlin present the best opportunities for future Cirque expansion
1. High and/or growing
population income
2. Tourism & travel-based destination
3. Past experience from touring
shows
Dubai
London
Sydney
Berlin
4. Diversify locations and
offerings
New York
$41,800
$35,400
$38,500
$34,200
$46,400
6,535,000 arrivals per year
15,340,000arrivals per year
1,869,000 arrivals per year
2,552,000arrivals per year
7,646,000arrivals per year
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Context Implementation & Results ConclusionPrograms Partners Places
Expanding in Dubai, London, Sydney and Berlin will give Cirque du Soleil a truly global footprint
Touring Coverage
Resident Locations
New Resident Locations
A global footprint will extend the Cirque du Soleil experience to more consumers and diversify its programs and partnerships
New Flagship Locations
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
4. Invest in social media
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
Context Implementation & Results ConclusionPrograms Partners Places
Given the increased complexity of pursuing additional expansion, a gradual implementation strategy is most appropriate
Current Programs
Touring Shows
Resident Shows
2010
New Programs
Nightclub(Las Vegas)
Flagship Theatre(London)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Launch and operateBuild
Explore potential expansion
Build OperateLaunch
New show in DubaiNew show in Sydney
New show in Berlin
Continue current shows and pursue corporate sponsorships
Continue current shows
Context Implementation & Results ConclusionPrograms Partners Places
This strategy will increase revenues by 25.6% and profits by 33% annually over the next 10 years
2010 2020
$137,300
$452,665
Total Profits
CAGR: 33%
2010 2020
$701,500
$1,797,176
Total Revenue
CAGR: 25.6%
(millions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Total Revenue 702$ 738$ 778$ 818$ 858$ 1,030$ 1,215$ 1,552$ 1,629$ 1,712$ 1,797$ Total Profits 137$ 144$ 148$ 151$ 87$ 136$ 189$ 391$ 410$ 432$ 453$
Note: Graphs in 000s
Context Implementation & Results ConclusionPrograms Partners Places
New ventures will generate annual profits by 2017 and contribute nearly $800M over the next 10 years
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-$100,000
-$50,000
$-
$50,000
$100,000
$150,000
$200,000
$250,000
New Venture Profits
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-$200,000
-$100,000
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Cumulative New Venture Profits
• New Ventures included are:1.Dubai Resident Show2.Sydney Resident Show3.Berlin Resident Show4.London Flagship Theatre5.Las Vegas Nightclub6.Touring Corporate Sponsorships
• Cirque will sustain losses from 2013-2015 during initial investment phase
Context Implementation & Results ConclusionPrograms Partners Places
Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit
PROGRAMS PARTNERS PLACES
1.Continue touring and resident shows simultaneously
2.Launch new nightclub experience
3.Develop flagship theatre
4. Invest in social media
1. Expand successful partnership models to hotels
2. Introduce corporate sponsors for touring shows
Global expansion:1. Dubai2. Sydney3. Berlin4. London
Drive profitabilityExtend Cirque du Soleil experience
Push frontiers of creative expression
QUESTIONS
Problem Definition
Strategy Statement
Changing Business Model
Corporate Social Responsibility
Extending the Experience
Touring v. Resident
Nightclub
Flagship Theatre
Resident Partnerships
Touring Sponsorships
Touring Shows: Additional
Considerations
Resident Shows: Additional
Considerations
Evaluating Program
Opportunities
Social media campaigns
Infiniti Deal Structure
Risk Mitigation
New Venture Profits Sensitivity
Analysis
New Venture Shows: Financial
Projections
Nightclub Venture: Financial
Breakdown
Organizational Structure
Places Analysis
Coverage Map
Timeline
Profits & Revenues
New Venture Analysis
EXTENDING THE EXPERIENCE: PROGRAMS, PARTNERS, & PLACES
PROGRAM APPENDIX – Touring Shows: Additional Considerations (A)
TOURING SHOWS
Should Cirque du Soleil pursue arena touring shows in addition to big-top shows?
Yes, but limit arena touring shows to older, repeat shows rather than new pilots.
Should Cirque du Soleil continue to invest in touring shows despite lower profitability?• Yes, touring shows are core to CDS’s tradition and brand• Doing otherwise would compromise broad brand exposure• Fewer customers exposed -> fewer loyal customers and repeat
purchasers
PROS OF ARENA SHOWS CONS OF ARENA SHOWS
Broader reach Danger of brand dilution
Scale and profitability Less intimate experience for consumers
PROGRAM APPENDIX – Resident Shows: Additional Considerations (B)
RESIDENT SHOWS
Does an excess of resident shows cannibalize financial impact?
• Must maintain novelty of each show• Diversity of partners and show offerings reduce
cannibalization within geographic markets• Example: Las Vegas
PROGRAM APPENDIX – Evaluating Program Opportunities (C)
Creative Potential
Compatibility with brand experience
Feasibility - implementation
Financial Opportunity Total
Nightclub 5 5 5 2 17
Hotel 5 3 2 3 13
Spa 3 2 5 1 11
Restaurant 3 2 5 2 12
Multi-use theater 2 5 2 5 14
Mall 2 1 1 4 8
Amusement Park attraction 4 4 1 4 13
Virtual simulation 4 3 3 3 13
The nightclub and flagship theater are the most viable opportunities to extend the Cirque du Soleil experience
PROGRAM APPENDIX – Evaluating Program Opportunities (D)
Size (SF) /description
Zip Code Upfront Costs (feasibility)
Potential Avg. Annual Revenue (opportunity)
Club 15,000 90048 (LA) $3.1 million $1.6 million
Hotel 300,000 90048 (LA) $74.8 million $1.9 million
Spa 23,000 90048 (LA) $2.8 million $60,000
Restaurant 9,000 90048 (LA) $2.2 million $980,000
Theater 500,000 90048 (LA) $180 million $100 million
Mall 2,500,000 90048 (LA) $262 million $62 million
Amusement park attraction
Benchmarked to new Harry Potter attraction
N/A $200+ million $55.3 million
Virtual simulation Benchmarked to Star Tours simulation
N/A $50 million $5.5 million
Metrics used to determine the development feasibility and financial potential of program opportunities
PROGRAM APPENDIX – Social media campaigns (E)
Existing Interactive Media Platforms• Conversations
Twitter Performing arts blogs Nightlife blogs Video-sharing (YouTube)
• Communities Facebook Other social networking sites
• Referrals Local city websites Referral / review sites City tourism websites
How will Cirque du Soleil utilize social media to create buzz about its programs?
New Platform: Exclusive Cirque du Soleil “Supporters” Website• Exclusive to show-goers• Incentives for referring friends• Sneak peaks into new shows• Discussion forum for sharing photos• Exclusive interactive features online
(e.g. games, behind-the-scenes videos, interviews with performers, etc.)
PARTNERS APPENDIX – Infiniti Deal Structure
Criteria for Successful
Partnerships
Resident Partnerships
Touring Partnerships
Other Partnerships
Case Example: Infiniti Automotive Partnership
• No infringement on Cirque creative freedom• Infiniti will receive recognition as sponsor on show
promotional materials and during marketing • No use of Cirque images or brand in Infiniti advertising
Potential Deal Structure
• Fixed Initial Sponsorship Fee: $1.5M• Occupancy Bonus: $10,000 for every 1% over 80% occupancy
Note: Estimates based on benchmark of comparable sponsorship deals
IMPLEMENTATION & OUTCOMES APPENDIX – Risk Mitigation
Risk Mitigation
1. Brand dilution • Maintain high-end exclusivity through resident shows and flagship theatre
2. Potential competition between new Cirque du Soleil programs and existing partner shows
• Cross-promotions and bundling with existing partners to drive customers to all shows
3. Upfront cost of expansion • Collaborate with existing partner for night club -> spread financial and operational risk
• Build flagship theatre gradually to avoid high upfront cost4. Unprofitable operations • Collaborate with existing partner for night club -> spread
financial and operational risk• Start with one night club as a “testing ground” for future
initiatives5. Oversaturation of circus market • Cirque du Soleil’s market is broader than just circus-goers –
the potential extends to all high-end entertainment-seekers6. Potential for delayed project start • Current operations provide continued revenue streams
7. Potential for partners to infringe upon Cirque du Soleil’s creative freedom
• Prioritize existing partners with proven reputation for respecting Cirque du Soleil’s creative freedom
• Encourage future creative developments through flagship theatre – Cirque du Soleil has 100% control
FINANCIAL APPENDIX - New Venture Profits Sensitivity Analysis (A)
• Breakeven in 2017
• $1 Billion in Profits by 2020 from New Ventures
• 25% profit margin increase over normal scenario
• Breakeven in 2020
• Loses of $250M+ through 20162010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-$300,000 -$250,000 -$200,000 -$150,000 -$100,000
-$50,000 $-
$50,000 $100,000 $150,000
Bad Scenario: Cumulative New Venture Profits
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-$200,000.00
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
Good Scenario: Cumulative New Venture Profits
FINANCIAL APPENDIX - New Venture Shows: Financial Projections (B)
(millions) Location Profit Margin 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Dubai -$ -$ -$ -$ 100.00$ 105.00$ 110.25$ 115.76$ 121.55$ 127.63$ 134.01$ Berlin -$ -$ -$ -$ -$ 100.00$ 105.00$ 110.25$ 115.76$ 121.55$ 127.63$ Sydney -$ -$ -$ -$ -$ -$ 100.00$ 105.00$ 110.25$ 115.76$ 121.55$
Flagship London -$ -$ -$ -$ -$ -$ 100.00$ 105.00$ 110.25$ 115.76$ 121.55$ Dubai -$ -$ 5,202.00$ 5,306.04$ 5,412.16$ -$ -$ -$ -$ -$ -$ Berlin -$ -$ -$ 5,306.04$ 5,412.16$ 5,520.40$ -$ -$ -$ -$ -$ Sydney -$ -$ -$ -$ 5,412.16$ 5,520.40$ 5,630.81$ -$ -$ -$ -$
Flagship London -$ -$ -$ -$ 64,945.93$ 66,244.85$ 67,569.75$ -$ -$ -$ -$ Dubai 28% -$ -$ 5,202.00-$ 5,306.04-$ 5,384.16-$ 29.40$ 30.87$ 32.41$ 34.03$ 35.74$ 37.52$ Berlin 28% -$ -$ -$ 5,306.04-$ 5,412.16-$ 5,492.40-$ 29.40$ 30.87$ 32.41$ 34.03$ 35.74$ Sydney 28% -$ -$ -$ -$ 5,412.16-$ 5,520.40-$ 5,602.81-$ 29.40$ 30.87$ 32.41$ 34.03$
Flagship London 55% -$ -$ -$ -$ 64,945.93-$ 66,244.85-$ 67,514.75-$ 57.75$ 60.64$ 63.67$ 66.85$ -$ -$ -$ -$ 128.00$ 262.40$ 558.52$ 586.45$ 615.77$ 646.56$ 678.88$ Total Profits
Resident
Reve
nues
Profi
ts Resident
CapE
x Resident
FINANCIAL APPENDIX - Nightclub Venture: Financial Breakdown (C)
Customers Per Night 200 Nights Open Per Year 312 People Served (Customers/Night * Nights/Yr) 62,400 Cover Charge/Customer 10$ Drink Spending/Customer 15$ Revenue 1,560,000$ Profit Margin 15%Profit Margin after Sharing with Partner 7.5%2012 Profit 117,000$
• Breakeven in 2018
• Cirque Profit Margin: 7.5%
• Based on 50/50 profit sharing with partner
• 5% annual revenue growth
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-$2,000,000.00
-$1,500,000.00
-$1,000,000.00
-$500,000.00
$-
$500,000.00
$1,000,000.00
Cumulative Nightclub Profits
OTHER APPENDIX – Organizational Structure (A)
Current StructureCEO
Show 1 Show 2 Show 3 Show 4
Show directors have complete creative freedom to develop innovative programs
OTHER APPENDIX – Organizational Structure (B)
Proposed Structure
CEO
Touring Director
Show 1
Show 2
Resident Director
Show 1
Show 2
Development Director
New Initiatives
Maintain “show over business” philosophy
• Increased business staff to manage expansion and development of brand extensions
• Modify structure while maintaining “show over business” philosophy
Extending the Cirque du Soleil experience
Time
Engagement with brand
TRADITIONAL CUSTOMER LIFE CYCLE: Consumer reaches maximum engagement with brand through singular interaction point, with engagement decreasing over time.
Show
Extending the Cirque du Soleil experience
Time
Engagement with brand
NEW CUSTOMER LIFE CYCLE: Consumer experiences increasing and sustained engagement with the brand through multiple interaction points.
Show 1 Club Show 2
Parameters for corporate responsibility
Community Environment
• Promote the potential of youth• Cirque’s creative complex
• Cultural action in Montreal• Citizenship action in St. Michel• TOHU – City of Circus Arts
• Citizenship action on tour shows• Resident shows
• Social action• Cultural action
• Social Circus – artistic intervention• Cirque du Monde• Training in Social Circus
• Reduce impact on climate change by ensuring responsible energy consumption
• Waste management and hazardous waste disposal
• Air and water quality management